Correlation Between First Trust and WBI BullBear

Can any of the company-specific risk be diversified away by investing in both First Trust and WBI BullBear at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining First Trust and WBI BullBear into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Trust Income and WBI BullBear Value, you can compare the effects of market volatilities on First Trust and WBI BullBear and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in First Trust with a short position of WBI BullBear. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and WBI BullBear.

Diversification Opportunities for First Trust and WBI BullBear

0.84

Correlation Coefficient

First Trust  WBI BullBear

Very poor diversification

The 3 months correlation between First and WBI is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Income and WBI BullBear Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WBI BullBear Value and First Trust is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on First Trust Income are associated (or correlated) with WBI BullBear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WBI BullBear Value has no effect on the direction of First Trust i.e., First Trust and WBI BullBear go up and down completely randomly.

Pair Corralation between First Trust and WBI BullBear

Given the investment horizon of 90 days First Trust Income is expected to generate 0.89 times more return on investment than WBI BullBear. However, First Trust Income is 1.13 times less risky than WBI BullBear. It trades about -0.25 of its potential returns per unit of risk. WBI BullBear Value is currently generating about -0.44 per unit of risk. If you would invest  2,239  in First Trust Income on October 4, 2024 and sell it today you would lose (78.00) from holding First Trust Income or give up 3.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

First Trust Income  vs.  WBI BullBear Value

First Trust Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

WBI BullBear Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WBI BullBear Value has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, WBI BullBear is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with First Trust and WBI BullBear

The main advantage of trading using opposite First Trust and WBI BullBear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, WBI BullBear can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in WBI BullBear will offset losses from the drop in WBI BullBear's long position.

The idea behind First Trust Income and WBI BullBear Value pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.